For this week’s post, I’ve decided to highlight the oral argument from PHH Corp. v. CFPB.* (Next week I will do the same for Raymond J. Lucia Companies, Inc. v. SEC.) To be clear, I do not have a perfect transcript. If you want perfection, contact the Court. But I have collected some quotes that struck me as interesting.

Agains that backdrop, here are some interesting quotes from the oral argument.

Let’s begin with Ted Olson’s argument on behalf of the appellants:

The issue before the court today was considered and decided by our Founders on three separate occasions in 1787, 1788, and 1789 by a vote of seven states to three at the Constitutional Convention; again as a key part of the ratification debates the very next year; and yet again during the very first Congress. On each occasion the founders voted for a single individual rather than a plurality in the presidency as the structure best calculated to insure a strong, vigorous, and accountable executive. ….

Court: “Mr. Olson, didn’t at all change with Humphrey’s Executor?”

This question is interesting too:

Court: “We also … can’t change Morrison vs. Olson, and Morrison was a single for cause official. … [And the independent counsel was] much more powerful than the Bureau. It’s much more powerful. In terms of it’s ability, the independent counsel’s ability to impair the power of the President which is the critical question here, that’s the question we have to ask. The independent counsel was much more threatening to the President of the United States than this Bureau.”

And this:

The Court: “It’s July 2018 and the president has the ability to replace the director of this bureau with anyone he wants for a nomination, he has the ability to do that. Yes, there’s Senate confirmation that happens often, and let’s imagine that a Democratic seat opens up on the FTC Commission and the president gets to fill that one, but by that statute has to appoint someone that’s from the Democratic party (that’s from the statute that was upheld in Humphrey’s Executor). My question to you is which is the greater intrusion on Presidential Power, the replacement of someone of your choice for the bureau or forcing the president to appoint someone from another party for the commission?”

Next, consider Hashim Mooppan’s argument on behalf of the United States:

Counsel: “Judge Griffith, your observation … that the functions that the FTC perform are executive in nature is a critical observation, because what it tells us is that the rationale of Humphries executor cannot be based on the functions of the FTC. It must be based on something else, and we would submit that but that something else is, is are the structural features of the FTC, and that is because what the court was concerned about was that multi-member bodies”

Court: “The court never framed its analysis in those terms, right? This is we’re going back trying to read into it, but they never made these arguments … did they?”

Next:

Counsel: “Yes, the general rule is that principal executive officers must be removable by the president at will. Humphrey’s Executor recognized a narrow exception to that, as Free Enterprise Fund emphasized, and the rationale of that exception has to be based on the structural”

Court: “But how is that, how is your rule even correct under Free Enterprise? Because in Free Enterprise the Supreme Court, assumed for the sake of the argument, that FCC Commissioners we’re protected by the Humphrey’s Executor good cause provisions. The Supreme Court also held that that was sufficient control of the president over SEC Commissioners ….”

Counsel: “The SEC like the FTC is a multi-member body, and so the rational of it being limited to the sort of deliberative bodies that could credibly be characterized, at least by the Supreme Court in 1935 as quasi-legislative ….”

This is also interesting:

Court: “What can we do with Morrison v. Olson as an inferior Court? We’re bound by Morrison, correct? You agree we’re bound by Morrison?

Counsel: “Yes you are your honor, and the key to Morrison v. Olsen is that that case did not involve principal officers; it involved inferior officers …”

This too:

Counsel: “All you need to do in this case is to recognize that once you take from a multi-member to a single entity, the CFPB director is just not distinguishable from the Secretary of the Treasury and the Secretary of Labor, and unless this Court is prepared to say that Humphrey’s Executor means that a for cause restriction is permissible for cabinet secretaries, a position that I don’t think any fair reading of Free Enterprise Fund or Morrison would lead to.”

And one more:

Court: “Why does your analogy have to be Cabinet secretaries? I mean, I can see the argument that those are not the same, but it seems to me that the logic of what’s going on here is that if you can have this single director, who is only removable for cause, who takes under his purview a huge part of what clearly used to be the business of executive agencies. Couldn’t you just have four or five or six of those that take all of this thing by subject matter, right? And then you would end up with a nominal president and a bunch of single directors accountable to no one.

Counsel: That’s exactly right, your Honor ….”

Finally, the argument of Lawrence DeMille-Wagman on behalf of the CFPB:

Counsel: “Before I forget, I’d like to address one point that was raised by PHH here, and that deals with the holdover provision in the Consumer Financial Protection Act. The Consumer Financial Protection Act gives the director a five-year term, and it provides that after that five-year term, the director may hold over until a successor has been appointed and confirmed, but this Court explained in Swan v. Clinton, 1996 decision, 100 F.3d 973 that where a statute permits an official to hold over, this Court will not infer that for cause removal protection applies during a hold over period, unless the statute makes specific provision for that, and there is no provision for that in the Consumer Financial Protection Act …. So after his 5-year term expires in July of next year, yes, he is removable at will by the president.”

This also is interesting:

Court: “But the history and tradition and culture in law of independent agencies, you know this very well, obviously, is that they turn over to control by the president’s party, either immediately, as happened when President Trump came in with almost all the independent agencies were pretty quickly, and that is in part because of the staggered terms in part because of the chair designation, so the FTC, like I said, the FCC all those have turned over and are now controlled by the party of the president. And that’s been the practice as I understand it going way back, and that doesn’t happen with this agency, and the question, I guess, I have is doesn’t that matter? Doesn’t that matter, in other words—that there’s a turnover in the others and not here?”

Counsel: “Turnover isn’t guaranteed and I’d like to point out that with respect to the FTC at the time of Humphrey’s Executor, the president could not—”

Court: “I understand that. This came into being in the late ’40s as a practice, as I understand it, and the turnover in the chair designation provisions, but since then, as I understand it, there’s been a tradition, and that’s why all those independent agencies quickly became headed by Trump-designated chairs within a week of the inauguration. That has not happened and cannot happen with the CFPB, and to my mind, that seems like—if the question boils down to, we have the history and we have the effect on liberty, but is there a real effect on the President—that seems like a further diminution of presidential authority, in other words, preventing that process that takes place at the other agencies, but I want your response to that because I know their answers to that.”

Counsel: “My understanding, your Honor, is that the president has no automatic authority to change the chairman of the board of governors to the Federal Reserve System. That term expires next February, and the agency that controls the monetary policy of the United States, and back to the mathematics Judge Srinivasan, with respect to the board of governors of the Federal Reserve System, and as Judge Pillard noted, because there are seven members who serve staggered 14-year terms, the president is never guaranteed an opportunity to appoint a controlling majority, it’s true that on occasion, positions may turn over, and there may be vacancies, but that’s not—”

This too is worth noting:

Court: “Mr. DeMille-Wagman, what is your response to the United States’ assertion that if your position is correct, then Congress could choose to make the Secretary of the Treasury removable only for cause?”

Counsel: “Your Honor, I don’t have an answer to that question, and I don’t think that this Court, in this case, needs to answer that question. For 130 years, Congress has created a wide variety of administrative agencies, structured somewhat differently, headed by sometimes 3, sometimes 5, sometimes 7 or 11 officials.”

There is a lot more going on, but this is a pretty good sample. Obviously, there is much to think about. If you are interested, you really should listen to the full argument.

Anyway, enough transcribing! There are the eight — yes eight — opinions from the Court. In the interest of keeping this post readable in five minutes, here is a very quick summary of the holding of, plus an interesting nugget from, each opinion:

Hawaiian Dredging Construction Company, Inc. v. NLRB: First, the holding (per Judge Rogers, joined by Judges Millett and Sentelle): “The Board had to determine whether the Hawaiian Dredging Construction Company’s discharge of its welders, after their Section 8(f) agreement had expired, was motivated by an intent to discriminate in violation of the employees’ statutory rights, or reflected the company’s long-standing business practice to rely on union hiring halls under Section 8(f) agreements for craft employees. The Board ruled the company violated Sections 8(a)(3) and (1) of the Act by terminating the welders because of their union membership. The company petitions for review, contending that the Board’s analysis under its own precedent is flawed and unsupported by substantial evidence. Because the Board failed to adequately address record evidence regarding the company’s understanding of its twenty-year practice and appears to have strayed from its precedent, we grant the petition for review, deny the Board’s cross-application for enforcement of its Order, and remand the case to the Board.” And second, the interesting point: One of the leading NLRB precedents is called Great Dane — isn’t that a funny name for a case?

Neustar, Inc. v. FCC: The holding (per Judge Sentelle, joined by Judges Tatel and Edwards): “Neustar, Inc. petitions for review of orders of the Federal Communications Commission naming another company to replace Neustar as the Local Number Portability Administrator. Petitioner argues that the Commission erred in not properly determining issues relating to the new Administrator’s corporate affiliations. Finding no error in the Commission’s decision, for the reasons set forth below, we deny the petitions.” What’s interesting? I did not know there was such as thing as “the Local Number Portability Administrator.” (This case is complex but fascinating; telecom cases usually are.)

Epsilon Electronics, Inc. v. TREA: Holding (per Judge Griffith, joined by Judge Rogers): “In 1995, President Clinton imposed trade sanctions against Iran that are enforced by the Office of Foreign Assets Control within the Department of the Treasury. OFAC is authorized to impose civil penalties against any person who exports goods to a third party who it has reason to know intends to send them to Iran. The principal question raised by this appeal is whether OFAC must also show that the goods actually ended up in Iran. We agree with the agency that the government need not make that showing and affirm the district court on that ground. But we also conclude that OFAC did not adequately explain parts of its determination that the exporter here had reason to know that its shipments would be sent on to Iran.” What’s interesting? Judge Silberman’s dissent, which pulls no punches. Here is a sample: “The first point [in the majority’s analysis] assumes that the complaint is somehow transformed into final agency action. It is so contrary to administrative law— indeed all law—I hardly know what to say. The second point is equally bizarre.” Silberman also has a fascinating footnote: “I would have been inclined to reject liability entirely rather than remand had appellant made the argument that imposing a penalty pursuant to an ambiguous regulation is inappropriate if you interpret it for the first time in a penalty proceeding. See Gates & Fox Co., Inc. v. Occupational Safety and Health Review Comm’n, 790 F.2d 154, 156 (D.C. Cir. 1986). But as the government pointed out at oral argument, appellant did not take that position.” (In an ordinary week, this case would receive much more examination.)

Washington Alliance of Technology Workers v. DHS: First, the holding (per Judge Sentelle, joined by Judge Henderson): “Washington Alliance of Technology Workers received a fee award under the Equal Access to Justice Act, for proceedings in which it partially succeeded in challenging a Department of Homeland Security practice allowing student visa holders to remain in the United States after completion of their formal education. Washtech appeals from the award, arguing that the district court erred in compensating it only for legal services time devoted to the one claim upon which it succeeded, as opposed to the entire litigation, and that the court abused its discretion in ordering further reductions from the amount sought. Because we conclude that the district court did not abuse its discretion, we affirm the decision of the district court.” Now, what’s interesting? Judge Kavanaugh’s one-paragraph dissent: “As the Supreme Court has stated: ‘Litigants in good faith may raise alternative legal grounds for a desired outcome, and the court’s rejection of or failure to reach certain grounds is not a sufficient reason for reducing a fee. The result is what matters.’ Hensley v. Eckerhart, 461 U.S. 424, 435 (1983). Based on that Hensley v. Eckerhart principle, I would vacate the District Court’s order and remand for recalculation of fees without penalizing Washtech for having raised alternative grounds for relief.”

Cierco v. Mnuchin: Holding (per Judge Edwards, joined by Judges Rogers and Srinivasan): “When Appellants first filed their law suit, they had standing to challenge the legality of the Notices. However, once their claim for the withdrawal of the Notices became moot, Appellants had the burden to show that they still had standing to seek a declaratory order that the Notices were unlawful. They have not met this burden. Even assuming that Appellants have the requisite injury and causation to support standing, they have not shown that a judicial order will effectively redress their alleged injuries.” This case has a very interesting discussion of standing and mootness — and it involves Andorra, money laundering, and the Patriot Act.

United States v. Brown: Holding (per Judge Griffith, joined by Chief Judge Garland and Judge Sentelle): “A trial court imposed on James Brown a stiffer sentence than the U.S. Sentencing Guidelines recommend. But the court followed proper procedures, and the sentence was not so harsh as to be an abuse of discretion. We therefore affirm Brown’s sentence against his procedural and substantive challenges.” The caption of the case says that James Brown is “also known as Jimmy.” Isn’t that true for many people named James?

Rodriguez v. Penrod: The holding (per Judge Millett, joined by Judges Srinivasan and Millett): “Lieutenant Colonel Robert Rodriguez, a retired member of the Army National Guard, claims that the Army unlawfully relieved him of command in retaliation for whistleblowing, in violation of the Military Whistleblower Protection Act of 1988. But first we must decide where Rodriguez’s claim should be litigated—should he have started in district court or did he properly proceed directly to this appellate court? The default rule is that jurisdiction starts with the district court, and that default rule applies here. We accordingly order that this action be transferred to the United States District Court for the District of Columbia.” Every judge on this panel was nominated by President Obama; that doesn’t happen often. [UPDATE: I meant Judge Pillard joined.]

Delaware Riverkeeper Network v. FERC: Holding (per Judge Edwards, joined by Chief Judge Garland and Judge Griffith): “Riverkeeper contends that the Commission violated the CWA because it granted Transco’s request to construct and operate the Leidy Project prior to the issuance of Pennsylvania’s § 401 water quality certification. Riverkeeper also claims that the Commission violated NEPA in failing to establish an accurate baseline from which to conduct its environmental review of the Leidy Project. In particular, Riverkeeper argues that FERC misidentified numerous specially protected wetlands, and miscalculated both the cover type categorization of those wetlands and the total acreage of those wetlands. We find no merit in these claims
and, therefore, reject the petition for review.” As this case illustrates, Judge Edwards knows a lot about standards of review — he wrote the book on them!

* By the way, I just reread my post from the day the case was initially decided and see at least one error. Specifically, I said this: “To be sure, I don’t think Judge Kavanaugh was bound by Morrison here (in other words, his efforts to distinguish Morrison are not nothing — the cases are different, and reasonable minds can disagree how similar the two contexts are), but this part of the analysis will no doubt attract attention.” Of course, the first clause of that sentence is wrong: The D.C. Circuit is bound by Morrison. What I meant to say, albeit poorly, was that Morrison is not squarely on point and may be distinguishable; whether the two contexts are different enough is the question that matters. Alas, the dangers of writing quickly ….

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About Aaron Nielson

Professor Nielson is an associate professor at Brigham Young University Law School, where he teaches and writes in the areas of administrative law, civil procedure, federal courts, and antitrust. He currently serves as a public member of the Administrative Conference of the United States, a federal agency that studies the administrative process and makes recommendations on ways to improve it. He also co-chairs the Rulemaking Committee of the American Bar Association’s Section of Administrative Law & Regulatory Practice. Previously he chaired the Section's Antitrust & Trade Regulation Committee. Before joining the academy, Professor Nielson was a partner in the Washington, D.C. office of Kirkland & Ellis LLP (where he remains of counsel). He also has served as a law clerk to Justice Samuel A. Alito, Jr. of the U.S. Supreme Court, Judge Janice Rogers Brown of the U.S. Court of Appeals for the D.C. Circuit, and Judge Jerry E. Smith of the U.S. Court of Appeals for the Fifth Circuit.
Follow him on Twitter @Aaron_L_Nielson.